RismadarVoice Business
September 17, 2026
Global markets are facing renewed stagflation fears as the Middle East war pushes oil above $100 a barrel, drives inflation higher and forces investors to prepare for further interest-rate increases by major central banks.
The pressure comes despite resilient economic growth and stock markets remaining near record levels, supported partly by heavy investment in artificial intelligence.
Oil prices have risen about 50 per cent from pre-war levels as attacks across the Middle East threaten major supply routes. Brent crude options show particularly heavy positioning around $100 a barrel by the end of December, although significant bets on much lower prices underline the uncertainty.
Diesel prices are nearing record highs, jet fuel has roughly doubled from February levels, while European natural gas has climbed to its highest since 2022.
INFLATION PRESSURES RETURN
Higher energy costs are feeding back into consumer prices.
US annual inflation stood at 3.4 per cent in August, while gasoline prices rose 3.9 per cent.
Eurozone inflation accelerated to 3.3 per cent from 2.9 per cent in July, moving further above the European Central Bank’s 2 per cent target. UK inflation also increased to 3.1 per cent.
The renewed inflation pressure has sharply changed expectations for interest rates.
Traders are pricing in almost one percentage point of ECB rate increases over the next year and further tightening by the US Federal Reserve following its latest 25-basis-point hike.
The Bank of England held rates on Thursday but said UK inflation could exceed 4 per cent by early 2027.
GROWTH HOLDS, BUT PRESSURE BUILDS
Major economies have so far remained resilient, with recent indicators showing continued expansion in the US and Europe.
Strong corporate earnings and AI-related investment have also helped support equities.
However, Chris Jeffery, head of macro strategy at LGIM, warned that pressures largely concentrated in commodities and interest rates could eventually spread into equity and credit markets.
Higher government bond yields are already raising borrowing costs. The average US 30-year mortgage rate has climbed above 6.7 per cent, its highest since June 2025.
Households are also being squeezed by higher fuel, energy and borrowing costs, while wage growth struggles to keep pace in some economies.
Investor caution is increasingly visible in consumer-focused stocks. US consumer discretionary shares are down nearly 6 per cent this year despite a roughly 10 per cent gain in the S&P 500, while the equivalent European sector has fallen about 17 per cent.
The growing concern is that persistently expensive energy and higher interest rates could eventually weaken consumer spending and economic growth while inflation remains elevated — the combination that defines stagflation.